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4/20/2016

The Effects of Whisky

Having always wanted to be a sophisticated Scotch guy, I only ventured to higher end whisky brands that was naturally, Scottish made. I wasn't wrong with this, however I was quite ignorant to whiskies, themselves. While there's nothing wrong with a good Scotch, that type of whiskies doesn't cause a local and global stir like simple economics of Japanese whiskies. There is strong demand for these popular and award winning whiskies leading to shortages and higher prices also.

Other than supply and demand, there's unique perspectives of Japanese whiskies and real the impact to other goods. Such as stated in the article of the rice farmer, a good such as the whiskies with the barley imports is influencing local rice production such that the paddy's owner is becoming a niche marketer. The paddy farmer decided instead of suffering a decreasing rice market for alcohol production to shift his market to barley. It would be interesting to see associated marginal costs for the farmers after increased local production and the distilleries, pre- and post, the increase of local production and further more the purchase of local goods. Obviously, there must be enough financial justification for the paddy farmers' decision, to switch to or incorporate barley farming.

The article makes an interesting assertion about locally grown barley, that it costs five times as much The Japanese government does provide subsidies for barley farms, which isn't much of a surprise considering Japan's global rank of importing and most countries have similar programs for other various types of farming. I am curious why is locally produced barley more expensive, but that's not for this post. However, I would like to see the financial details to show the effects of the decision of entering the barley market, even if it's just the short-run. Hopefully, I'm fortunate enough to try some Yamazaki Sherry Cask 2013.

6 comments:

CJ: 35/50 Whisky and whiskey are both acceptable spellings (so no points taken off). In "... I only ventured to higher end whisky brands that was naturally ..." you should have used "were" instead of "was". (-3), In "I wasn't wrong with this, however I was quite ignorant to whiskies, themselves." the "to" sounds kludgy and the comma probably isn't necessary. (no points taken off) In "... that type of whiskies ..." you need the singular rather than the plural. (-3) I am not sure exactly what you mean in "... cause a local and global stir like simple economics ..." so I'm not sure if you need a "the" in front of simple. (no points taken off). The clause "... perspectives of Japanese whiskies and real the impact ..." makes no sense. (-3) The entire next sentence makes little sense as written, but I was able to piece it together from the source article; your readers should not have to do that. (no points taken off) In the next sentence the first part (It would be interesting to see associated marginal costs for the farmers) makes sense, but what follows does not (after increased local production and the distilleries, pre- and post, the increase of local production and further more the purchase of local goods.). (-3) In the last sentence of the paragraph you write "Obviously, there must be enough financial justification for the paddy farmers' decision, to switch to or incorporate barley farming.". I think this is OK: the article only mentions one farmer specifically (so that would be apostrophe before the s), but it also mentions farmers more generally (which would be apostrophe after the s). In the next paragraph, you have no period after the first sentence. (-3)

I am not Scottish, but I do know that they would appreciate that you know that Scotch is the drink and Scottish is the people.

CJ, you wrote "The paddy farmer decided instead of suffering a decreasing rice market for alcohol production to shift his market to barley." Markets don't decrease. Prices may, and I think that's what you mean about the rice farmer. And the farmer didn't shift his market, he shifted his production from rice to barley.

I also think in this sentence "The Japanese government does provide subsidies for barley farms, which isn't much of a surprise considering Japan's global rank of importing and most countries have similar programs for other various types of farming." you're implying that Japan imports a lot generally, while the article was pretty specific that it was talking about just barley and barley malt.

This is kind of a weird source article, in that it starts and ends by talking about rice farmers, but spends the middle talking about whiskey producers and consumers.

I don't think there's any link between the source of barley and the quality of the whiskey. The article doesn't mention one. It also mentions imports of barley malt, which is an intermediate product in which I'd guess that any link to the geographical source has been eliminated. To me, this suggests that the interest in including Japanese barley into the Japanese whiskeys is mostly about product differentiation. Perhaps they think they can get a bigger mark-up from sourcing locally?

I also thought it was interesting that the rice farmers see barley as a crop that helps in their rotation. This means the opportunity costs to incorporating it in their produce mix are low. But then I wonder, why didn't they do barley before?

As to why the price of Japanese barley is expected to be so high, I think this probably has to do with labor costs. Japan's agricultural subsidy schemes are known generally for strong discouragement of capital investment and development of economies of scale. So the quintuple price probably reflects inefficiency.

Sir, isn't it a fact that also Japan's agricultural costs are high due to limited available farm land? In response to your mark-up from sourcing locally, from what I know of the Japanese people and also how it was stated in the article about pride instead of financials. I can only equate that to my understanding of their culture, but I can make an association to a good friend who's Irish. The comparison of pride in their cultures, I'd say, is similar. For my friend, I know he avoid a whisky that was produced in Britain, just due to the fact of the deep pride that runs between the two nations.

CJ: 44/50 You wrote "In response to your mark-up from sourcing locally, from what I know of the Japanese people and also how it was stated in the article about pride instead of financials." but this isn't really a sentence. (-3) You also wrote "... I know he avoid a whisky ..." which is missing an "s" on "avoid" to make the subject, object, and verb agree with each other. (-3)

Yes, indirectly Japan's agricultural costs are due to land scarcity. But that's more of a choice. Japan could mechanize more to make the land it has more efficient. But that would shift farm revenue from paying for labor to paying for capital. Japan could also import much more of its agricultural needs. But then there'd be less domestic agricultural revenue, which in this case would be even more highly directed towards labor. So either way, saying that Japan has limited land is a diversion from the fact that they're supporting a lot of farmers.

I think the viewpoint you expressed about land is very common. But I also think most people making it don't realize that it's mostly a dodge to shift attention away from how much money ends up in farmers' pockets (note that this is farmers collectively, individually there may so many of them that they don't get much). It's very difficult to find any industry anywhere in which labor is not ultimately 60-80% of the costs, if you dig deeply enough.

It actually makes me smile a little bit that Japan is importing barley from the U.K. — which is also a small, mountainous, densely populated, island (with an even worse climate to boot). Why isn't their barley super-expensive too? One could say that it has to do with land values and agricultural subsidies, but ultimately all the checks from land sales and subsidies end up in the hands of ... farmers.

While I am not one to imbibe of scotch, I do appreciate quality. This idea of making quality alcohol is big business now a day. I feel like people are tired of the normal mundane drinks that large brewers mass produce. A great example of this exodus from mass produced alcohol is seen in the increase of local microbreweries opening up across the country. The process of doing something well yet not necessarily doing it different is somewhat of an economic theory in its self, is it not? Whether it be digging a ditch or making award winning scotch, if you can do something better than everyone else you in essence create your own demand.

The idea of doing something better than everyone else is definitely not lost on the Japanese. It appears that once the Japanese decide to get into a market, they raise the standard for everyone in that market. A few great examples of this are; Lexus/Toyota, Acura/Honda, Infinity/Nissan, Sony, Panasonic, and the list could goes on. So why not whiskey, right?

P.S. CJ I hope you get to taste that Yamazaki Sherry Cask 2013 one day. Life isn’t worth living if you don’t have aspirations.

I'd be interested to know if people who think that having too many brands is a sign of a cultural problem would agree with you. I don't think their position is well-founded, but I know they're out there, and I know they take that position.

I also wonder how much of this is ... hmmm ... "imaginary" product differentiation. I'm not knocking the producers here. I think they're in the business of differentiating their products. But I wonder about consumers; we perform relatively poorly in blind taste tests (in short, we're making a lot of it up).